In Short
The Situation: Following the 2016 enactment of the Justice Against Sponsors of Terrorism Act ("JASTA"), courts construed aiding-and-abetting liability narrowly, disallowing claims against defendants that did not deal directly with a terrorist organization or its proxy. Over the last year, however, courts have permitted claims that previously might have been dismissed to proceed to discovery. Plaintiffs meanwhile are increasingly filing JASTA claims against businesses whose services or products are further removed from any close connection to terrorist parties.
The Result: More lawsuits can be expected against companies conducting business in parts of the world where terrorism occurs or that have customers connected to these regions, and a greater percentage of these cases are likely to survive motions to dismiss and move into discovery.
Looking Ahead: Companies should review their due diligence practices with respect to existing customers and new business opportunities to account for changing litigation exposure to Anti-Terrorism Act ("ATA") liability moving forward. Banks and other private companies drawn into litigation must diligently defend themselves with proactive strategies to avoid secondary liability under the ATA.
JASTA's stated intention is to provide litigants "with the broadest possible basis" for relief against entities that have "provided material support, directly or indirectly, to foreign organizations or persons that engage in terrorist activities against
Legal Framework and Early Caselaw
JASTA expressly added aiding-and-abetting liability to the ATA. It provides a private right of action for plaintiffs who suffer an "injury arising from an act of international terrorism committed, planned, or authorized by an organization that had been designated as a foreign terrorist organization" against "any person who aids and abets, by knowingly providing substantial assistance." 18 U.S.C. § 2333(d)(2). To state a claim, a plaintiff must plausibly allege facts showing: (i) an injury caused by an act of international terrorism; (ii) the act was committed, planned, or authorized by a designated
As to the last element,
In the earliest JASTA aiding-and-abetting cases, courts issued opinions affirming early dismissals of these cases. First, the Second Circuit required that a defendant be "'generally aware' that it was ... playing a 'role' in [the terrorist party's] violent or life-endangering activities," in contrast to other statutes requiring only "knowledge of the organization's connection to terrorism." Linde v.
Following these decisions, courts routinely dismissed secondary liability claims, indicating a "decided trend toward disallowing ATA claims against defendants who did not deal directly with a terrorist organization or its proxy." Freeman v.
Recent Cases Rejecting Dismissals
Both the Second and D.C. Circuits recently have revisited the standard for pleading a JASTA aiding-and-abetting claim.
Kaplan v.
The Second Circuit reversed, finding that the district court demanded too much. Despite language in Linde suggesting that the defendant must intend to further terrorist activities to have "general awareness," Kaplan suggested that a defendant need only have been aware that it was playing a role in unlawful activities from which terrorist attacks were foreseeable. 999 F.3d at 858-61. The Second Circuit also rejected the bank's argument that substantial assistance must be rendered directly to the principal for liability to attach. Id. at 855-56. The court explained that JASTA permits "an aiding-and-abetting claim where the defendant's acts aided and abetted the principal even where his relevant substantial assistance was given to an intermediary." Id. at 856, 862.
The Kaplan panel further noted that plaintiffs had adequately alleged the "general awareness" element in part because they cited numerous, detailed media reports in which
Shortly thereafter in Honickman v.
Atchley v.
Having cleared that hurdle, the D.C. Circuit applied the pleading standards set out in Kaplan and Honickman. Plaintiffs alleged that defendants—medical-supply and manufacturing companies—secured contracts with the
These cases have led some district courts to reject motions to dismiss, interpreting Kaplan and Honickman to have "lowered the bar to state a JASTA aiding-and-abetting claim." Mem. & Order, at 7, Bartlett v. Société Générale de Banque au Liban, No. 19-cv-0007 (E.D.N.Y.
Implications for Future Aiding-and-Abetting Liability
What does this mean for potential defendants? Discovery, in more cases. Successful motions to dismiss allowed resolution of these cases without the burden of intrusive discovery, including compelled production of internal documents and testimony from company officers and employees. Following Kaplan and its progeny, however, district courts have denied motions to dismiss and allowed aiding-and-abetting claims to proceed to discovery. E.g., In re Terrorist Attacks on
When these types of cases proceed to discovery, foreign bank secrecy laws often become important. One example: in Miller v.
Reducing the Risk
Entities doing business in countries where terrorist organizations operate, or with customers that have ties to those regions, should take steps to limit exposure. First, such entities should consider conducting a risk assessment. For any concerns that materialize, entities should engage qualified legal counsel to determine whether remediation is advisable. See, e.g., Siegel, 933 F.3d at 225 (noting that "[
Second, banks and other entities should consider implementing due diligence procedures beyond ordinary benchmark "Know Your Customer" standards where appropriate. Banks and entities making regulatory disclosures or entering into administrative settlements with governmental agencies should also consider whether public statements contained therein may create ATA litigation risk.
Third, digital assets may present another source of liability for financial services providers. As digital assets become increasingly accessible, financial institutions should ensure their risk assessment measures are sufficiently comprehensive to account for potential exploitation by terrorists and their supporters. Although most FTOs continue to move money via the traditional financial system, digital assets are not immune from abuse by these groups. See, e.g.,
Fourth, financial institutions should take extra care in vetting third-party service providers such as payment providers and cash vault service providers. These third parties are not subject to AML/CFT obligations and therefore present heightened risk under JASTA.
Finally, financial services providers should familiarize themselves with red flags indicative of terrorist funding. See Fin. Crim. Enforcement Network, Aspects of Financial Transactions Indicative of Terrorist Funding (2002). Sophisticated financial institutions have automated systems to perform transaction monitoring as part of their compliance programs and are more readily able to detect and scrutinize financial activity linked to high-risk jurisdictions.
Other types of financial institutions, including banks not regulated by a federal functional regulator, and industry gatekeepers such as accountants, are not subject to extensive AML/CFT obligations. These industry participants should dedicate time and resources to ensuring staff are trained to manually detect high-risk transactions. Further, these entities and individuals should become and remain familiar with the lists of high-risk and noncooperative jurisdictions as determined by the
Four Key Takeaways
- District courts have opened the door for plaintiffs to file more aiding-and-abetting claims against companies doing business in countries where terrorist organizations operate or with customers having ties to these regions. More cases are proceeding past the motion-to-dismiss stage and heading to discovery.
- Plaintiffs are increasingly attempting to replace JASTA's requirement that a defendant act "knowingly" with a mere negligence—or "should have known"—standard, seeking to impute to companies any and all statements about customers and counter-parties published anywhere in the world. As a result, companies should consider the appropriateness of their existing due-diligence protocols with respect to customers and new business opportunities.
- Discovery disputes related to foreign blocking statutes and privacy laws are likely to proliferate as a greater number of aiding-and-abetting claims against foreign defendants proceed to discovery.
- JASTA remains a developing and unpredictable area of the law. Litigants should anticipate that the Courts of Appeals, and ultimately the
Supreme Court , will weigh in on related issues in the near future.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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